Sao Tome Waits for First Oil Bonus

The tiny West African twin island state of Sao Tome and Principe is awaiting its first oil payment from an expected oil boom after signing its first exploration and production agreement this week.

According to the deal, government officials say three oil companies have 30 days to pay Sao Tome and Principe a front-end bonus of $50 million to exploit the so-called Block One of the joint development zone with Nigeria.

Nigeria is to receive $74 million. The block was awarded to American giants Chevron Texaco and Exxon Mobil along with the Nigerian company Energy Equity Resources last year.

For Sao Tome's government, this will be the first money it receives from a dragged out process of tapping into the expected billions of barrels of crude oil deep in its waters. The announcement also sped up efforts to establish an effective banking system.

The lucrative joint development zone is in waters along previously disputed maritime borders with Nigeria, but there is also possible oil in waters closer to the islands.

In an interview late last year with VOA, President Fradique de Menezes said he has taken a multi-lateral approach in making sure this new money - almost equal to usual annual revenues - will benefit his impoverished constituents.

"What we are doing is how to ensure that in the future the citizens of the country will really benefit from the resources of oil," he said. "For that we are discussing between us, with assistance of some people abroad, mainly Americans, the University of Columbia, and financed by the World Bank and IMF, ensuring that the future generation will benefit [from] what we will get from the oil resources, from the oil exploration."

Exxon Mobil said in a statement that all payments made under the terms of this initial contract would be fully disclosed, a step good governance activists have applauded.

They say oil exploration has usually been a curse in Africa, causing violence, corruption and more poverty.

Sao Tome's government had already included the expected signature bonus in its 2004 budget, and raised government salaries, creating some financial difficulties.

Most of the new money will go toward paying off debt, but laws have also been passed to ensure oil money will go toward health, education, infrastructure and job creation programs.

President de Menezes says Sao Tome has previously relied on cocoa revenue, which has been disintegrating in recent years.

"The cocoa beans, which has always been our foreign currency, the price is so low in the international markets that people would like to find out something else which can generate us better resources so that's the reason why all the people their mind is concentrated on the oil resources," he said. "But we are trying also to minimize that. Myself, in my public interventions, I ask my fellow citizens please don't always think the oil will settle everything because even tomorrow with oil resources, we cannot spend the oil money like the people think."

Bidding which has now started on several other blocks in the joint development zone could soon bring more signature bonus money. Companies that have expressed interest in the other blocks include U.S.-based ECL International and Vintage Oil and Gas as well as the Nigerian group Conoil.